A gas fee is the payment you make to a blockchain network to process your transaction. It rewards the validators or miners who include your transaction in a block and protects the network from spam. On Ethereum the unit of computational work is called gas, which is where the name comes from.
Fees can be a few cents or tens of euros for the same action, depending on how busy the network is. Understanding how they are calculated helps you avoid overpaying and avoid failed transactions.
Key takeaways
- Fees go to the network, not to your wallet app (although some apps add their own fee on top).
- Ethereum fee = gas used × (base fee + priority tip). The base fee is burned.
- Bitcoin fees depend on the size of the transaction in bytes, not on the amount sent.
- Layer 2 networks and quieter times of day are the easiest ways to pay less.
Why blockchains charge fees
Block space is limited. Every few seconds (Ethereum) or about every ten minutes (Bitcoin) only a certain number of transactions fit into a new block. Fees work like an auction: when many people want to transact, those who pay more get processed first. Fees also make it expensive for attackers to flood the network with junk transactions. The validators or miners who collect them are paid for securing the chain, as explained in proof of work vs proof of stake.
How Ethereum gas fees work
Every action on Ethereum needs a certain amount of gas. A simple ETH transfer uses 21,000 gas; a token swap or NFT mint can use several times more because it runs more code.
The price of gas is quoted in gwei. One gwei is one billionth of an ETH (0.000000001 ETH). Since the London upgrade in 2021 (EIP-1559), the price per unit of gas has two parts:
- Base fee — set automatically by the protocol according to demand, and burned (destroyed), not paid to anyone.
- Priority fee (tip) — an extra amount paid to the validator to include your transaction quickly.
- Total fee = gas used × (base fee + priority fee)
Example: a transfer using 21,000 gas when the base fee is 10 gwei and you tip 1 gwei costs 21,000 × 11 = 231,000 gwei, or 0.000231 ETH.
Your wallet also sets a gas limit — the maximum gas you allow a transaction to use. If a transaction runs out of gas it fails, but the gas already used is still paid. That is why failed transactions still cost money.
How Bitcoin fees work
Bitcoin has no gas. Its fees are based on the size of the transaction in virtual bytes (vB), priced in satoshis per vbyte (sat/vB). Sending €10 or €10 million can cost the same if the transactions are the same size.
Transactions that combine many small inputs (for example lots of small deposits you received) are larger and therefore more expensive. Modern address types (bc1… SegWit and Taproot) produce smaller transactions and lower fees than old addresses starting with 1.
Why fees spike
- Popular token launches, NFT mints and airdrops create bursts of demand.
- Sharp market moves push many people to trade or move funds at the same time.
- On Bitcoin, inscriptions and other new uses have periodically filled blocks.
During spikes, the same action can cost ten times more than usual. Unless it is urgent, waiting a few hours is often the cheapest option.
How to pay lower fees
- Use a Layer 2. Networks such as Arbitrum, Optimism and Base typically cost a fraction of Ethereum mainnet fees. See our Layer 2 guide.
- Pick quiet times. Demand is usually lower at weekends and outside US business hours.
- Check a fee tracker before sending — most wallets show current fee levels.
- Batch actions and avoid unnecessary approvals; every on-chain action costs gas.
- Withdraw from exchanges in fewer, larger amounts rather than many small ones.
- On Bitcoin, use a SegWit or Taproot address and avoid consolidating many tiny inputs when fees are high.
Never lower a fee so far that your transaction gets stuck for days. Most wallets offer slow, normal and fast options; normal is fine for everyday use.
Fees on other blockchains
| Network | Fee model | Typical cost |
|---|---|---|
| Ethereum mainnet | Gas × (base + tip), base burned | Cents to tens of euros, depending on demand |
| Ethereum Layer 2s | Gas on L2 + share of L1 data cost | Usually a few cents or less |
| Bitcoin | sat/vB × transaction size | Varies widely with demand |
| Solana | Small fixed base fee + optional priority fee | Usually a fraction of a cent |
Typical costs change constantly — always check the current fee in your wallet before you confirm.
Frequently asked questions
Who receives the gas fee?
On Ethereum the base fee is burned and the priority tip goes to the validator. On Bitcoin the whole fee goes to the miner who mines the block.
Why did my transaction fail but still cost a fee?
The network did the work of executing your transaction until it failed (for example by running out of gas or exceeding slippage). That computation is still paid for.
Can I cancel a pending transaction?
Sometimes. Many wallets let you speed up or cancel a pending Ethereum transaction by sending a replacement with the same nonce and a higher fee. Once confirmed, it cannot be reversed.
Why does my exchange charge a withdrawal fee?
Exchanges pay network fees when they send your crypto out and pass that cost on, sometimes with a margin. Compare withdrawal fees between exchanges and networks.
Next step: see how Layer 2 rollups cut fees, or compare centralized and decentralized exchanges.
